Analysis: LRCX PYPL

After you receive this Alert, we will be buying 100 shares of Lam Research (LRCX) at roughly $182.15. Following the trade, LRCX will represent 1.70% of the portfolio.

We will take the funds raised on Tuesday, when we locked in a nearly 30% gain on 100 PayPal (PYPL) shares in our Alert here, and put that capital (and more) back into the market and in our Lam Research position. The shares are up nicely in today's session, and we are eager to scale deeper into our most recent initiation. We are watching the semiconductor stocks today and the group's continual outpacing of the broader market's push to the upside.

We initiated this position one week ago in our Alert here, and provided additional commentary on our February members-only conference call here. After about 2-3 more quarters of sequential earnings decline, we believe a meaningful inflection to earnings will occur as the memory industry's supply/demand dynamics lead to increased capex/investment spending. Although the bottom is always uncertain, we treat management's recently announced and aggressive $5 billion share purchase as the call that the industry's bottom is near, and that LRCX has already bottomed itself.

When we combined the buyback with the solid ~2.40% yielding dividend, we believe our patience in Lam Research's track toward serious earnings growth is sufficiently compensated. And thanks to outpacing industry growth and continued market share gains, amongst other factors, Lam Research management continues to target adjusted earnings per share in the range of $23 to $25 in calendar-year 2021.

So we see two ways for shares to continue to press higher: one on earnings expansion as the industry condition begins to favor Lam; and the second on multiple expansion as investors buy this name for its powerful earnings growth trajectory.